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Monday, April 25, 2011

MUMBAI: Two full-time members on the board of the Securities and Exchange Board of India (SEBI), who are widely perceived to have raised the quality of investigation and enforcement, will soon step down as the government has decided to look for new candidates after having earlier sought their consent to extend their terms.

The two officials, KM Abraham and MS Sahoo , were appointed by the government on the board of the securities market regulator in July 2008 for a three-year term.

The decision to scout for new faces, a task that will be carried out by a committee headed by the cabinet secretary, was taken well before the new SEBI chairman, UK Sinha, came on board in the third week of February.

The decision to restrict the tenure of the two officials is a logical outcome of the government's decision not to give a five-year term to their former boss, CB Bhave , who stepped down as SEBI chairman this February.

As in the case of Bhave, the finance ministry had explored the possibility of five-year terms for the two members. In mid-2009, the ministry had asked if they were agreeable to serving for two more years.

Both concurred, but North Block-as the ministry is often referred to, after the building in which it is housed-changed its mind and decided to hunt for successors from the ranks of civil servants and other professionals, signalling a dismantling of the team built during Bhave's tenure, said two persons with direct knowledge of the matter.

Both Sinha and Bhave declined comment.

Ajay Shah, professor at the National Institute of Public Finance and Policy and a former consultant to the finance ministry, said the performance of SEBI in the last couple of years was the best in its history. "It would be a tragedy if a top quality team like this is dispersed," he said.

Two other securities market professionals, who spoke on the condition that they would not be named, said the quality of fact-finding and orders issued by the regulator had improved considerably during the last couple of years.

In its edition dated August 23, 2010, ET had reported that Bhave was unlikely to see his term extended beyond three years. On February 17 this year, we revealed the behind-the-scene manoeuvring behind the decision, the crucial element of which was the decision by North Block, in early 2010, to withdraw a recommendation to give Bhave a five-year term.

The decision on this was to have been taken by the cabinet committee on appointments, a group of senior ministers, including the prime minister. But in January 2010, the finance ministry called back the proposal. This, according to media reports, was prompted by a note from Omita Paul, an advisor to the finance minister. In that note, Paul is reported to have suggested that there was no need to decide on Bhave's tenure more than a year before it expired.